By Bernie Becker
With Help from Danny Nguyen
February 24, 2026
STRENGTHEN THOSE SAFEGUARDS: Former Rep. Ryan Costello is urging the IRS to crack down on tax preparers who use AI to help businesses and other taxpayers cash in on tax benefits.
Costello flagged concerns about tax prep firms using AI chatbots with “minimal human oversight” for complex tax situations, such as determining eligibility for tax credits, in a letter sent Monday to Treasury Secretary Scott Bessent.
The IRS hasn’t fleshed out any rules guiding AI use by tax preparers, which Costello said exposes taxpayers to the technology’s shortcomings — including hallucinated guidance and difficulty navigating complex tax situations.
Taxpayer professionals could also face a negative feedback loop because of AI, he added, arguing they could feel pressured to use faulty technology to keep up with savvier competitors — and in the process subject taxpayers to more audits and erode public trust in the tax system.
The letter comes as tax preparers increasingly turn to AI to get a leg up on tax filing.
Large tax prep companies like TurboTax and H&R Block have publicized their use of AI in tax filings while stressing they use an added layer of involvement from tax professionals.
Costello is a board member of the advocacy group TaxWatch America, which has been sounding alarms about the risks of AI in a host of tax preparation matters.
His letter requested that the IRS issue guidance that outlines prohibited AI use in complex tax matters, lays out scenarios in which AI use is prohibited and requires mandatory human oversight, documentation and disclosure when preparers use the technology.